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Bank-firm relationships in default prediction models. An analysis on a sample of Italian firms

8 November 2016 at 1:00 PM - 2:00 PM

Room 409, Campus on Viale Romania 32

Speaker: Filomena Pietrovito, Università del Molise and Università di Cassino

Filomena Pietrovito will present a research co-authored by Carmen Gallucci, Vincenzo Formisano e Michele Modina about "Bank-firm relationships in default prediction models. An analysis on a sample of Italian firms".

Abstract

The aim of this paper is to evaluate the contribution of several aspects of the bank-firm relationships in anticipating the corporate default event at least one year before. Using a unique dataset on a sample of 113 co-operative credit banks and about 12,000 firms operating in Italy, between 2012 and 2014, this paper documents that checking accounts and long-term loans activities provide additional explanatory power respect to financial information gathered from balance sheets in predicting the likelihood of default. Estimating a probit model, it finds that overruns and usage of credit lines on checking accounts, as well as overruns and payments overdue on long-term loans increase the accuracy prediction of default events by about 10%.

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Bank-firm relationship in default prediction models.pdf845.63 KB